Friday, 28 May 2010

Pyramid schemer FHTM agrees to pay $ 1 mn in refunds

CHARLOTTE, N.C. -- Several prominent Carolinians, including the wife of former Bank of America CEO Ken Lewis, have signed on as sales reps for a multi-level marketer recently fined as a "pyramid scheme."

Donna Lewis joined Fortune Hi-Tech Marketing, known as FHTM, in December 2008 at the invitation of her friend, Charlotte television personality Barbara McKay.

Last month FHTM agreed to pay almost $1 million in refunds and fines to settle a claim by the Montana Commissioner of Securities and Insurance that the multi-level marketer was a "pyramid promotional scheme."

"It is truly not a pyramid," Donna Lewis said, when reached by phone at her home. "It's helping people in this horrible economy make a living."

Lewis said she joined FHTM but is not actively involved in selling the program or products.

"I just did it to tell a few people about it who really needed help," she said.

Some FHTM sales reps used Lewis' name to promote the company, even publishing websites that erroneously link the name of the former Bank of America chief executive to the scheme.

"He is not involved at all," said Donna Lewis, adding, "If he thought it was wrong he would not let me be involved."

"Ken Lewis has never been a part of the company," said Barbara McKay, a fixture on WBTV-TV for more than two decades. "But he was confident I would never lead her into anything that wouldn't be good for her."

McKay says she entered Fortune Hi-Tech Marketing as a representative and is now an "Executive Manager."

FHTM claims to have signed up hundreds of thousands of representatives to sell products from well-known brands like GE, Dish Network, Travelocity and Home Depot.

But videos posted by the dozen to websites like YouTube and Facebook show FHTM recruiters emphasizing the recruitment of yet more sales reps.

"When you get your first three people signed up as a business owner you all have made $300, and then we will teach them the exact same thing and do everything in our power to repeat the process," Fortune rep Todd Rowland, a former high school coach from Arkansas, tells a packed meeting room.

Reps pay a fee of $299 to join the company, reduced after the Montana action to $199.

FHTM has charged still more fees for training and website development.

"And in the process very few actually sell a product," said Bob Fitzpatrick, a Charlotte watchdog who monitors pyramids with his website PyramidSchemeAlert.org.

Websites for some FHTM reps list other prominent Carolinians to bolster the company's credibility, but who denied involvement. They include former Charlotte Mayor Pat McCrory, who said he'd "never heard of it. I have absolutely no connection." Also listed but denying involvement in FHTM -- NASCAR legend Geoff Bodine, who said, "I'm not involved. Someone signed me up. They're trying to use my name."

Fortune Hi-Tech Marketing settled the Montana complaint on April 22, agreeing to pay up to $840,000 in refunds and $100,000 in fines, plus $50,000 to the state's Investor Protection Trust. North Dakota also ordered FHTM to cease and desist doing business in that state without proper licensing and FHTM paid a $12,000 fee.

FHTM CEO Tom Mills told WHAS-TV, "I have a great deal of respect for the people from both North Dakota and Montana. The authorities handled it appropriately in my mind, and I think we've come to an agreement and we're moving forward. We're still doing business in their states."

The Better Business Bureau in Lexington, Ky., the company's home, has given Fortune Hi-Tech Marketing a grade of "F".

"From all I can tell about this operation it's primarily about recruiting other people into the network," said Charlie Mattingly, CEO of the Louisville BBB. "So I would say people should be cautious."

A spokeswoman for the North Carolina Attorney General says her office is concerned about FHTM, but so far the company has paid refunds promptly in response to complaints.

11 comments:

LEXINGTON, Ky. — Marie Richardson of Daytona Beach, Fla., has never been as excited about a business opportunity as she is about her new work for Fortune Hi-Tech Marketing. In her first week and a half as an independent sales representative this summer, she earned $800 in bonuses for recruiting four customers who agreed to pay a fee to become salespeople and buy or sell products.

To afford big payouts at the upper levels, former Fortune regional sales manager Joseph Isaacs says the company targets desperate unemployed people, Hispanic immigrants and others who are struggling to make ends meet. Joanne McMahon, a national sales manager speaking at a training session USA TODAY attended here, said it is the people who can't afford the fee to join Fortune who need the company the most."I heard testimony of people who had become millionaires in a matter of months," says Asper, 38, who once earned $100,000 a year in retail management. "They led us to believe we'd be one of those people."

The reward for recruitment Fortune documents show its sales reps are paid $100 to $480 for recruiting customers who pay fees to become representatives and buy or sell a small number of products. They receive commissions of up to 1% — or less than $1 on a $100-a-month cell phone bill — on products and services, which they are often encouraged to buy for themselves or give away. Former sales managers including Isaacs and Yvonne Day, a plaintiff in the lawsuit seeking class-action status, say their product commission checks were often less than $20, while income from bonuses totaled several thousand dollars. A lawsuit filed by Isaacs alleges 82% of 100,000 Fortune representatives last year "failed to earn a single residual commission over $20 despite making personal purchases."

The Federal Trade Commission considers a company a pyramid scheme even if it has products for sale if it's clear during recruitment that "the real way to make money isn't by selling that product but by recruiting other people to pay money for the right to sell that product," says Monica Vaca, assistant director for the FTC's division of marketing practices.

The FTC Act also prohibits "deceptive and misleading practices," which may include claims about what people make that don't make "clear if it's not typical of what everyone who joins is making," Vaca says.

Dear Monte, In the Indian context, earning commission on enrolling members is nothing but easy and quick money and attracts the provisions of Prize Chits & Money Circulation Schemes (Banning) Act, 1978.The Supreme Court of India made it clear that the infinite chain is 'mathematical impossibility'.

anything with Joseph Isaacs involved (FHTM, Russian Brides, Banks, bikini models, phone connections) yes the guy in Fl that started all this battle. They found him skimming their business and not passing the customer on. Isaacs is so slick he makes these folks look like 1st graders.

So many questions and not enough answers. In a world fighting for customers and companies watching over their reputations like a hawk, what do these companies all have in common? I am referring to major Fortune 100 icons like General Electric, DuPont, Time, Verizon Wireless and AT&T as well as some smaller ones like Travelocity, Peter Lamas and BSP Rewards Mall.

The answer is simple, somehow over the past 10 years and probably unbeknownst to them, they became aligned with a Multi-Level Marketing company known as Fortune Hi-Tech Marketing (FHTM). This was mainly accomplished because Fortune Hi-Tech does business with some of their authorized dealers and 3rd party affiliates.

Fortune’s attempt to prove it’s legal by association has backfired, as it normally does. It is very difficult to build your reputation at the expense of someone bigger, when they have no idea who you are.

Should these companies have a say in who gets to use their brand in the pursuit of the almighty dollar? For the first time in FHTM’s history the number of companies represented by it on the menu board at fhtm.net is shrinking. How can that be good?

So the important question now remains, why did these huge conglomerates allow their names and reputations to potentially be smeared by a company like FHTM? The answer is simple - they didn’t know what was happening.

According to ex-representative, Joseph Isaacs from Tampa, Florida, “When these companies find out that their trademarks, names, logos and reputations are being used by FHTM in order to aide FHTM in proving its’ legitimacy they will issue a cease or desist, insist on the actions to stop or not allow FHTM to market their products”. Which others will walk when they find out the real business model and litigation history of Fortune Hi-Tech?

As of March 2011 every one of the companies listed above has either issued a cease and desist or no longer allows itself to be aligned with Fortune Hi-Tech Marketing. How has this affected their aura of legitimacy? How do they explain all of this to new and even existing independent representatives?

In reviewing some FHTM business presentations on YouTube, it was apparent that the logos of GE, DuPont, Verizon and AT&T were there for one reason. What are the repercussions of only being legal by association? According to Joseph Isaacs, “Top leaders would tell prospects during the business presentation that they must be legal because no iconic Fortune 100 company would affiliate with a scam”. “All of these major companies sent their CEO’s and legal teams to meet with founder Paul Orberson to evaluate FHTM and check out their books. This cannot be so and was nothing more than a lie used to recruit”, he added. What rhetoric do these leaders use today to explain the loss of such major brands? Only time will tell.

Will FHTM leaders and owners blame the latest Verizon fiasco on the reps like they did in their announcement pertaining to DuPont only a few weeks ago? How long will this saga continue? Which other company will research the true business model of Fortune Hi-Tech Marketing and un-align themselves next? It is too early to tell but this story is far from over.

If the massacre continues then Fortune will be nothing more than a vitamin and dog food MLM. That is not very hi-tech and not too many fortunes will be made by affiliation. How much representative revenue has been lost as a result of these major companies walking away? How many current representatives are scrambling to replace so many customer points? How many Regional and Executive managers won’t get bonuses because their team points are greatly depleted because of the latest loss? We searched high and low for the answers but didn’t find any.

It looks like the whistle-blower made famous (Joseph Isaacs) by exposing the FHTM pyramid scheme in 2010 has been vindicated. The FTC closed FHTM last week and seized all of their assets as well as the assets of Paul Orberson and Tom Mills. The receiver will begin the claw back process soon in an attempt to get back the ill-gotten gains of the few to return the money to the 100's of thousand victims, according to the Kentucky AG.

ISGTELECOM is Joseph Isaacs. We give him 5 Porcelain Thrown awards for his new book I was the Victim and ONE power flush note. He was kind enough to print it in paper back so we can use the completed portions to finish the paper work.